Is Your Employment Contract a Problem?

May 1, 2015

You have been terminated. Your company provides you with a termination letter indicating how much it will pay you.  Is it enough? The letter says that the company will pay you what is required under the Employment Standards Act (ESA) in accordance with your employment contract. Great. The company will comply with the employment contract and the law, that is good enough. Right?

Not always.

If the termination clause in your employment contract is not enforceable, you could be entitled to much more.

For Example

You have worked for the company for 10 years. Under the ESA, you are entitled to eight weeks’ notice of termination with an additional 10 weeks’ severance pay if the company has a payroll of at least $2.5 million or more. If the termination clause is not enforceable, you may be entitled to between nine and 12 months’ notice of termination, or pay instead of this notice. If you are earning $50,000 a year, the difference in termination pay could be as much as $40,000.

Is it Enforceable?

More and more decisions from Ontario courts are finding termination clauses not to be enforceable. In a decision released in late April 2015, the court found that the language used in the termination clause was ambiguous. It did not clearly explain what the employee was entitled to when terminated, even though it mentioned the ESA. That the language was not clear enough, hurt the company and helped the employee. The judge found that the termination clause was not valid.

A lawyer can help you evaluate the employment contract when you are offered a severance package, or before you even start the job. Both severance packages and employment contracts can be negotiated.

If you have been asked to sign an employment contract, or provided a severance package, and you want to speak with an employment lawyer with experience in this area, contact us at [email protected] or 1-888-640-1728 (toll free) or 647-204-8107 (within the GTA).

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702 - 2 Bloor Street West, Toronto ON M4W 3E2

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Collingwood Office

220 - 1 First Street, Collingwood, ON L9Y 1A1

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